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China opens national registry for carbon offsets, doubles supply

Wed, Jan 14, 2015 - 7:47 PM

[BEIJING] China on Wednesday opened its national register for carbon offsets, allowing buyers to transfer credits for emitting carbon from the national scheme to regional exchanges and opening the way for spot trading of the permits.

At the same time it approved the issuance of 7 million offset credits, more than doubling the supply.

The offsets, known as Chinese Certified Emissions Reductions (CCERs), are a low-cost option for power generators and manufacturers covered by China's seven pilot emissions trading schemes to meet their carbon emission targets, as they cost less than regular permits.

Emitters are allowed to use CCERs, generated from projects that can prove they reduce greenhouse gas emissions, to cover 5-10 per cent of their annual emissions.

At the same time it opened the national CCER registry, which will make it possible for CCERs already purchased to be transferred to accounts that emitters hold in the regionally administered carbon markets.

A handful of forward-based CCER deals have gone through in the market so far, negotiated bilaterally, but until the registry opened there was no certainty these could be transferred to the regional exchanges. Deals have been announced ranging from 5 yuan (US$0.80) to 38 yuan per CCER.

Sellers will now also be able to put their CCERs directly onto regional carbon exchanges, which market participants expect will contribute to a spot market that will give a clearer picture on pricing.

"We have received some offers from intermediaries, but spot credits are in higher demand," said one project developer who wished to remain anonymous.

The doubling of CCER supply is expected to put pressure on permit prices, which are lingering around 24-35 yuan in most of the pilot markets, a level say is too low to spark investments in low-emissions technology.

Participants in the seven markets can use a total of around 110 million CCERs annually, but potential demand is expected to rise as new regions and sectors in China are included in carbon trading, one of China's main policies to meet its target of cutting CO2 emissions per unit of GDP to 40-45 per cent below 2005 levels by 2020.